More and more commercial transactions are moving online and the so-called digital economy continues to expand its reach into every facet of the traditional analogue economy. For businesses, this means they have access to new channels to reach existing clients as well as new opportunities to expand market share with a competitive digital offering. For consumers, the ever-expanding digital economy promises greater access to products and services at their fingertips, as well as increased ease in accessing and comparing information about them. This also tends to encourage more competitive pricing among providers. In emerging economies, the development of digital channels has in some cases allowed sectors to essentially skip stages in development seen in other countries, moving directly to digital solutions rather than having to invest in vast networks of hard infrastructure.

Digital Divide

While it is clear that the digital economy has opened up many potential growth opportunities, one of the most important barriers is the so-called digital divide. The quantity and quality of mobile phone network coverage in some emerging and developing economies still lags behind that of more advanced economies. That said, there is no country of any income level in which access to mobile phones and the networks that support their use is universal, although this digital divide is obviously far more acute in lower- and middle-income economies. It can be a particular challenge in countries marked by relatively lower rates of urbanisation or challenging terrain, which complicates the extension of physical networks.

However, the example of the success of M-Pesa in extending financial services to rural areas of Kenya, to the great benefit of its farmers in particular, show that these challenges are far from insurmountable. What is key moving forward is to recognise that alongside the requisite hard infrastructure investments, there is also a need for policymakers to put in place soft infrastructure, the legislative and institutional frameworks necessary to sustain growth in the digital economy. Countries in the Gulf have been among the most forward-looking in this regard. While the digitisation of state services in countries like the UAE is driving the transition towards digital, the favourable regulatory environments in place are helping to foster and support digital innovation in many areas of the economy.